War cabinet to help economy

Oct 7 2008 by William Green, The Journal

A REGIONAL "war cabinet" is being created to tackle the worsening economic situation as business chiefs yesterday call for an interest rate cut to stimulate growth.

North East Minister Nick Brown, chairman of regional development agency One NorthEast Margaret Fay and business and union representatives will meet Chancellor Alistair Darling and Business Secretary Peter Mandelson on a quarterly basis to discuss economic issues.

The cabinet, bringing together a range of regions, is designed to ensure the concerns of different areas are heard and acted upon across Government with a focus on small business.

Its discussions will feed into a national economic council chaired by Gordon Brown set up to deal with economic turmoil sparked by banks across the world running out of money – threatening UK jobs, people’s homes and livelihoods. The development came as North East business and union chiefs called on the Bank of England to cut interest rates to stimulate growth.

The bank’s monetary policy committee, which sets interest rates, is due to make a decision on Thursday. It has not cut rates since April and the base rate currently stands at 5% –compared to 2% in America.

Ross Smith, head of policy at the North East Chamber of Commerce, said the regional economic council was a positive development and stressed the need for rate cuts.

He said: “The challenges that have happened in the globalised financial system over the last few weeks are almost unprecedented. Our members have reported to us that they have very serious concerns about inflation so the Bank of England can’t take its eye off that.

“But it is essential to stimulate investment so we need to see an interest rate cut sooner rather than later.”

John Wright, national chairman and regional vice-chairman of the Federation of Small Businesses, said the new committee needed to help existing firms and encourage entrepreneurs.

He acknowledged the risk of increasing inflation with too large an interest rate cut, but added that a 0.5% reduction would not be unreasonable.

Regional TUC secretary Kevin Rowan said: “We need a boost and we need it quite quickly and an interest rate cut might just give people the confidence to stimulate investment.” On the regional economic council, he added: “Generally we are of the view that public policy making in Whitehall isn’t often regionally sensitive enough. So anything that gives us the opportunity to express those concerns at the regional levels would be welcome.”

Margaret Fay, of One NorthEast, said: “I welcome the opportunity, along with regional partners, of highlighting the latest developments, issues and concerns in the North East economy directly to the Chancellor of the Exchequer and the Secretary of State for Business every quarter.

“This will be an invaluable opportunity to feed regional input into the Government’s national economic policy moving forward.”

Bishop Auckland MP Helen Goodman, a Government whip and former Treasury official, said the new committee was particularly important for the North East to ensure its economic progress continued.

Last night Mr Brown said: “I am working very closely with the representatives of business in the region.”

And he has pledged to focus on getting the North East through the current global economic turbulence.